China to buy new Sudan oil block for US$600M

Nov 15, 2005 (HONG KONG) — China Petrochemical Corp., or Sinopec Group, plans to partner with its domestic rival China National Petroleum Corp., or CNPC, to acquire drilling rights to an oilfield in Sudan for about US$600 million, a person close to the deal said Tuesday.

The two unlisted Chinese oil giants are expected to sign the deal by the end of this year, said the person.

The source added the Sudan government is looking to keep a stake in the oilfield venture, which is expected to produce more than 20,000 barrels of crude oil per day at the initial stage of the development.

“To Sinopec Group, it is not a huge deal, but it is just the beginning,” said the person, who declined to be named.

“Sinopec Group needs CNPC in the sense that it (CNPC) has more experience in overseas acquisitions…Sinopec has to catch up with others in acquiring overseas upstream assets.”

Sinopec Group, which doesn’t have any upstream oil assets in oil-rich Sudan, is the unlisted parent of China Petroleum & Chemical Corporation (SNP), better known as Sinopec, Asia’s largest refiner by capacity.

CNPC, the unlisted parent of China’s largest integrated oil producer PetroChina Co. (PTR), has upstream oil assets in Sudan.

Officials of both companies couldn’t be immediately reached for comment.

Sinopec Group exited from U.S.-sanctioned Sudan in 2000 ahead of its unit’s global offering in October that year. It sold its entire 80% stake in a small exploration block in Sudan to CNPC in June 2000, as human rights groups in the U.S. protested against the company’s business ties with Sudan.

CNPC, whose PetroChina unit also listed in 2000, didn’t back out despite protests from the human rights groups, who claimed Sudan’s Islamist government was using oil revenues to fund its war against rebels in the mainly Christian and animist south.

(Dow Jones/ST)